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Michael Dell unaware of accounting woe; says Dell misjudged demand

Dell CEO Michael Dell said Wednesday that he "was not involved in or aware of" the company's accounting irregularities. Dell, which recently concluded an audit and restated more than four years of financial results, is installing new processes, teams and systems to ensure accounting shenanigans don't occur again.
Written by Larry Dignan, Contributor

Dell CEO Michael Dell said Wednesday that he "was not involved in or aware of" the company's accounting irregularities.

Dell, which recently concluded an audit and restated more than four years of financial results, is installing new processes, teams and systems to ensure accounting shenanigans don't occur again. "I take responsibility for making sure those issues are addressed," said Dell, who was speaking at the Citigroup 14th Annual Global Technology Conference.

Michael Dell addressed numerous concerns about Dell's consumer strategy, avenues for future growth and the company's ability to procure parts and reduce order backlogs.

Here are some of the highlights:

On new growth markets for Dell, the CEO noted that data centers, emerging markets and small to mid-sized businesses will fuel growth. Regarding the SMB space, Dell said "we think we can serve those customers even more effectively." As for emerging markets, Dell is building new factories in Poland, India and Brazil. Dell also brought up services, an avenue the company has been touting for years.

On Dell's software strategy compared to Hewlett-Packard and IBM, two companies that have made some big acquisitions. Dell was asked whether the company needed a big transformational acquisition to be a software player.

His answer:

"There's lots we can do to grow our enterprise business without going to software," said Dell. One of the biggest risks for such a move is that Dell benefits from partnering with big software firms such as EMC and Microsoft. A big acquisition would alter those partnerships."

When asked about Dell's acquisition strategy, the CEO had a quick answer. "We don't have an acquisition strategy as much as we have a growth strategy," says Dell.

On Dell's services strategy, Dell said the goal is to become the IT department for some companies. The biggest challenge is changing the relationship from one based on selling products to one tethered to services. 

On the consumer market, an area where Dell lags, the CEO said his company is overhauling everything.

Dell said that the company has plans for both the direct and retail sales model. One focus is cutting the channel inventory risks for Dell.

"There are things we can do with direct distribution to the store level. We're paying close attention to all the issues."

He also added that Dell is in a dialogue with retailers about the most efficient delivery methods. "There's a cooperative dialogue. We have some systems to build to make sure we execute this well. When you look at the overall consumer business it's not a business that is contributing to our bottom line. We believe it can in the future," he said.

On the product front, Dell said he will stick to the company's core business when it comes to consumers. 

"Look for more emphasis on design and we will definitely look to broaden. But we're going to stay focused on desktops and notebooks in the near term."

On Dell's supply chain edge, Dell was blunt about how the PC maker fumbled its cost advantage.

"Competitors did get better and we squandered some of our opportunity with efficiencies. On the commercial business we still have a nice advantage and grow. On the consumer business we're building a new business there. Our competitors have more scale and know a lot more about this business than we do."

On misjudging demand, Dell said the company goofed with a conservative forecast. "Six months ago we had quite conservative forecast for our demand. That has turned out to be incorrect and the backlog is higher than it has been historically. We have engaged with the supply line to improve commitment so we can drive this backlog down to more reasonable levels."

"There will be much more rigor in our demand forecast so we can signal to our supply base what our needs are."

On a potential enterprise spending slowdown, Dell was cautiously optimistic. But he did note that there may be a drop off in demand from financial services firms due to the credit market turmoil. 

"So far demand looks pretty good, but wouldn't surprise me if there's some effect in financial services. But broadly it looks pretty good." 

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